Bringing Treasuries, Bonds and Traditional Investments On-Chain w/ Norton Wang (Cogito)

**Speaker A:** Foreign. **Speaker B:** Hello and welcome back for another. **Speaker C:** Episode of the Strange Water Podcast. Thank you once again for the support that you keep demonstrating for this show. **Speaker B:** It really means a lot to me. **Speaker C:** For as long as most people in crypto can remember, we've existed in a near zero interest rate environment. Then, in March 2022, a little less than two years ago, the Federal Open Market Committee, aka the FOMC or the Group of People Leading the US Fed Reserve System, announced the first of what would end up being over 10 rate hikes in less than two years. Now look, there is an endless amount to unpack about the post Covid rate hikes, and we can tell plenty of stories of companies or even industries being knocked over because of these policy decisions. But let's focus on one aspect in particular. For the first time in decades, U.S. treasury bills were actually yielding a pretty respectable return. Under this new paradigm, you could earn 4 to 5% per year just by sitting on the asset regularly referred to as risk free collateral. And though 4 to 5% might not seem like that much, the risk reward ratio is so favorable that vast swaths of liquidity left financial assets to quietly farm about 5%. While most of us in crypto watched the tide go out and lamented our plummeting net worth, some very smart builders realized that the only reason that so much money left the crypto ecosystem was because it was required to get access to these rates. And so those same builders realized that if we build it, they will come. And so I'm very excited to introduce today's guest, Norton Wang. Norton is the CTO of the COGITO Protocol, a company dedicated to bringing traditional financial investments on chain. They began by providing exposure to treasury bills and are expanding to a green bond fund and beyond. Perhaps most interesting, Cogito is deploying new AI to give customers access to highly advanced trading strategies. Strategies all on chain. This conversation is a really fun chance to think through many of the basic principles and purposes of DeFi. **Speaker B:** I have so much respect for anyone. **Speaker C:** Doing what I call the Lord's work making Ethereum and blockchain technology actually relevant to the real world. And by the end of this episode, you will clearly see how Norton and Cogito are doing exactly that. One more thing before we begin. Please do not take financial advice from this or any podcast. Ethereum will change the world one day, but you can easily lose all of your money between now and then. **Speaker B:** Okay, let's bring on Norton. Norton, thank you so much for joining us on the Strangewater podcast. **Speaker A:** Yeah, thank you for having Me excited. **Speaker B:** To be here, of course. So before we get into basically what you're building and everything on chain, I'm a huge believer that the most important part of every conversation are the people in it. So with that kind of as a frame, can you tell us a little bit about like who you are, how you found like computer science and programming and then let's talk about like little, a little bit about your journey into crypto. **Speaker A:** Sure, yeah. I only worked in startups my entire career, so my first job out of college was at a startup. We ran out of money. But the founders there, they were super early in bitcoin. They were mining bitcoin I think in 2011. And so I got into the space pretty early. My first role was at a company acquired by DCG called Trade Block. But now with their whole situation, they have shut down. But that was sort of the first, sort of what we were envisioning was the first Bloomberg for crypto. Right. A place where you would go to get market data, you know, look at charts, do some trading, that sort of stuff. Obviously that type of product is, you know, really necessary right now. And there's lots of people, you know, lots of competition in that space. But that was sort of where I first dipped my toes into, you know, bitcoin. I did a little bit of playing around with like bitcoin script, which is kind of fun. And then Ethereum happened. So we sort of pivoted into doing enterprise blockchain kind of stuff because that was sort of all the rage in 2015. 16. We were working with these large institutions to try to like put, you know, equity swaps and credit swaps on chain. And I mean, to this day that experiment is still going. These institutions, they move slow and they're basically upgrading their 40, 50 year old infrastructure to the modern age. So they're still sort of new to cloud. Right. And so that's a bit crazy. So trying to introduce blockchain and consensus and all this new technology to them is a bit of a challenge. And so I guess that sort of leads me to where I am now at Cogito. So Cogito is trying to tokenize, you know, tokenized T bills. We're starting with T bills just because yields are, you know, 5% still pretty good right now. We figure that there's, you know, a big enough of a market for risk free rates in crypto. And so I'm taking my experience, you know, working with sort of these tradfi people doing sort of tradfi things. But also, you Know, I'm a software engineer. I wrote Solidity. You know, I've done all this stuff before and it's just taking these traditional assets and putting them on chain, tokenizing them. And here we are today, right? People talk about real world assets, which, you know, this RWA acronym I'm not a huge fan of because really all assets are assets, right? Some of them are on chain, some of them are off chain. So you can call them off chain assets, you can call them traditional assets, whatever. They're. All assets are real. Bonk and WIF are just as real as gold and T bills, in my opinion. So yeah, that's. That's where we are today. **Speaker B:** Yeah. Awesome. So obviously we're here to talk about like what you're building with cogito, right. You know, with us Internet brains. I'm always scared when we get invoice and I have to say the words out loud, but okay, so cogito, before we get there, I just like, want to spend some time like spinning on your journey to here. So it sounds like you got very lucky by working in a startup that if it wasn't directly, it was at least it wasn't directly working in Bitcoin. It exposed you to it. And so I guess rewinding back to the time, back to that time and before, you know, it became so clear that there was applications and opportunities for crypto to grow outside of just like digital gold or digital money. Can you talk a little bit about like, what was exciting for you about Bitcoin in like the 2011-2015 era? Was it really just about, you know, the, the kind of typical decentralization, trustlessness, uncensorability? Was it about like the ability to deploy code and watch it have like real world monetary value? What attracted you to this space when you first were put in front of it? **Speaker A:** Yeah, yeah. So I guess, like a lot of participants in this space. You know, I played a lot of MMOs, I played Runescape. Right. So, you know, there was gold, I did a lot of trading, you know, I farmed gold. And it just became that. That was sort of how I learned economics. Right. And through playing Runescape and then so the idea of having, you know, gold, digital gold somewhere that you could trade and then collect and then use it to buy stuff like that all just made perfect sense to me. And so bitcoin was my first introduction to that idea, like programmable money that you could just send to anyone in the world, you know, without having to do kyc, without having to create a profile Somewhere you just drop in an address and then you send it and you're done. Right. And so it was hard to program in Bitcoin. I couldn't bar against my bitcoin by writing code to do that. It was really hard to do anything to do to write any logic using Bitcoin. And then back then we were still experimenting with colored coins. All of these weird NFT concepts, counterparty. None of that was particularly great to work with. And so obviously that's why Ethereum was developed and launched. So when Solidity first came out I was like, oh yeah, this is way easier to work with compared to Bitcoin script. And then from there I just started writing Solidity, playing around with the first version of MakerDAO, the single side. Right. I think it was what it was called. Yeah, I lost a bunch of eth collateralizing against it when it dumped from 800 down to like 80. And that was my introduction to Defi and like, oh, we could actually take the current existing financial system and rewrite it in Solidity and you have all of these things like capital markets and decentralized exchanges and there you go. It was great. It was great. I loved it. **Speaker B:** Yeah. No, it's so funny you say that because I feel like there aren't that many people who have the MMO background and like really use that to click together. Like obviously you know, Internet property like is valid. It just like we don't know what it's going to look like. But quick story, I like the first time I got in like such serious trouble that like I remember my parents thought I was going down a bad path and whatever. But it was when I convinced them to let me use their credit card to buy 20 worth of gold for World of Warcraft. And yeah, they were just like, oh my God, this kid is just like spending money on and like it's, it's like very much like a traumatic part of my childhood. But it's just like so funny about how you know, just being in that space in the right time like really gave you some, just more gave you the tools to be more comfortable with like Bitcoin and digital currency when it came out. And I think now that we're in 2024 and we have ETFs and like they're, you know, everyone's comfortable with like paying for like digital property. It's kind of more a trivial point. Sounds stupid, but I just, I think there's something really special about like who were the first people to own Digital property. It. It kind of was MMO players. And so it doesn't surprise me to find people like you that were there in 2011. **Speaker A:** Yeah, yeah, exactly. Yeah. The. And you know, just the, a lot of the lessons that I learned, such as, you know, don't. You don't like when you're trading with somebody, you know, make sure that you're actually getting what you think you're getting and that they're not trying to scam you. A lot of these, these, you know, ideas, these lessons that I learned back then are still applicable today. You know, it's crazy like the, the amount of knowledge that I gained just from playing this, you know, stupid game called Runescape when I was 12. It's like I'm still looking back to those lessons, you know, as a 30 year old. **Speaker B:** Yeah, yeah, for sure. So I think we can talk all day about Runescape and about like MMOs, but let's get a little more Ser before we get to what you're building today. I want to spend a little bit of time just reflecting on that period in 2015ish when like all the energy of yourself, your company, and a lot of the energy of the industry was around enterprise blockchains or around like, yes, it's very clear that eventually somehow business and somehow TRADFI will engage with these systems. But at the time we really thought it was by private blockchains. And I guess my question to you is, can you reflect a little bit about that time and do you think that that was just kind of like the wrong direction and enterprise blockchain is almost like an oxymoron and we know that now, or do you think that a lot of the paradigms that were developed during that time were ultimately right and just we'll see them again, they just needed their kind of time to, you know, distill? **Speaker A:** Yeah, that's a good question. I think probably the biggest takeaway from that period was how long it takes for these large institutions to be comfortable with any slight change. I was actually on site at DTCC's offices in New Jersey in Jersey City. And really like, it was kind of a sad place. You know, a lot of the employees that I worked with, they didn't have any passion for what they were building. They were simply maintaining these systems that were built so long ago, you know, and so they became stuck with like bureaucracy and all of this overhead and you know, oh, you want to like, oh, you want to look at this one file? Hold on, let me get my manager's approval. So really getting them to Open up and to embrace new technology was the big change. You know, it wasn't so much, oh yeah, we're going to make this decentralized or whatever. We're going to have a private blockchain. I don't think they cared about that. What they cared about was just like, oh look, there's, there's this new system and it's time to upgrade our system because our system is handling too much money to break. But yeah, like private blockchains, maybe they have their place, I'm not exactly sure. But I think how I see, you know, like if 2015 had gone in a different direction, I would have liked it to see it go probably. Okay, okay, let me, let me take, let me rephrase. If we had to do 2015 again, right. I would have liked to see for example Uniswap already deployed and the institutions seeing that, oh, there's a lot of on chain capital, there's access to global liquidity. You know, that wasn't there before. With this we can take our existing assets such as these, you know, exotic mortgage backed securities or equity swaps or whatever and we can give them more liquidity because that's really what institutions care about. They care about liquidity, you know, access, make the numbers go up. Right. Everybody has the same goal of making the numbers go up. And so if we had just worked together to provide liquidity to these weird assets and to make it all about improving access, then I think there would have been more collaboration and more productive outcomes from that rather than a bunch of these four month proof of concepts that really didn't go anywhere. **Speaker B:** Yeah, I think that's interesting and a very fair perspective. My background, I was in technology innovation at one of the world's largest CPG companies. And you know, I think once you're on the inside of these like huge corporations, you realize that like half the time when you're doing this new technology, like proof of concept or you know, like these are really marketing things and like specifically they're marketing things between CTOs and CEOs, not even really external and like it's a whole different thing to actually like as an organization embrace a new technology and say we want to move over as opposed to like hiring a like dev shop to like create, to fork, you know, Ethereum to create, you know, JP Morgan Chase Chain and like kind of go from there. And so. Well that's a bad example because they, you know, point being is that there's like a huge leap between like the proof of concept and actually embracing it and I think that in 2015 we really saw proof of concepts and maybe hopefully we're entering an era where for regulatory reasons, for maturity reasons, for liquidity reasons, like it's actually viable to start thinking about this as a real business tool and not just a buzzword. **Speaker A:** Yeah, exactly. Yeah, I. What I think the big blocker now is compliance, you know, and yeah, you know, working at Cogito now has taught me that compliance is really a big blocker to anything fun that you want to do. **Speaker B:** Yeah. So I think that's a great segue into we'll save the compliance and like the things that you're struggling with right now with Cogito. But so let's get into cogito. So you gave us a little bit about what it is, but can you tell us what's the founding story? Like how did you realize that there is a opportunity and then how did you bring the team together to decide to tackle it? And then maybe through that you can talk a little bit about the kind of products that you're starting with and then what the long term vision is. **Speaker A:** Yeah, so actually Cogito began as a spinoff of SingularityNET, which is one of the, probably one of the oldest crypto AI projects. The founder, Ben, he really wanted to build out his idea of like a AI driven stablecoin. So that was the original idea behind Cogito. And so he actually hired my wife. My. So actually my wife is, she is a former HSBC banker and. And then I met her and introduced her to crypto. And then she did a master's program at Penn and she got a degree in computer science. And yeah, now she's just like full time crypto, you know, with a corporate banking background. So that's my wife and she was the one who tried to build out this stablecoin idea. And so I was just there in the background, you know, listening to the meetings. And so I was thinking, this sounds really hard to build. If you build it, what is the product market fit? Because we've seen so many of these projects try to do this and fail. People just want dollars. People want digital dollars that are, you know, like at an account at the Fed and they want to be able to send it to whoever they want. So really, you know, I think stablecoins is really hard to break into. So then we were thinking, wait, why don't we do something else that combines both of our backgrounds and experiences. What about tokenization? You know, we. Tokenization has sort of been around for a long time now. But really it was like last year, late last year when we saw rates get to a point where it was like pretty attractive to go and buy T bills that we were like, okay, let's just do T bills. You know, let's, let's start with T bills, right. And use that, you know, as, as a way to get our feet wet and to learn how to tokenize things. And then after that we can tokenize other assets, equities. We can probably do a fund that is driven by AI and finally fulfill this vision of an AI driven tokenized product. Right. Even if it's not a pure stablecoin. So that was the start of this idea. We raised a bit of seed funding last year actually. No. Was it this year? It was this year, yeah. Sorry, no, last year it's 2024. **Speaker B:** Yeah. **Speaker A:** Wow. The new year passed. That's crazy. Yeah. Okay, so that was last year and yeah, we had a few team members from the original Singularity Net stablecoin idea and then we hired a couple of other people for marketing and designer role, content creator role and yeah, that's, that's where we are now. **Speaker B:** Very cool. So I, I definitely want to like de dive much deeper into the AI aspects of that. But let's put that aside for a moment and just talk through kind of the challenges and really what's been going on around the, the treasury bills. Right. And I think to me what's been very interesting is that the whole, the concept of tokenization has literally been around since, you know, the first like Bitcoin. And we went through that whole of like dental coin and grocery coin and all of this like crazy stuff. Right. And so conceptually, like literally in the Ethereum white paper by Vitalik, he talks about tokenizing real world assets. And basically up until 2022, like it was totally a meme and just wasn't going to happen. Right. And we can actually my question to you is going to be like, can you talk us through this process and this change and why this happened? But it, it really took the changing interest rate environment and really treasury bills becoming an actual attractive investment before anyone really took this like tokenization thing seriously. And I don't want to say anyone. Like, there's definitely people out there that were trying to do stuff with like real estate and whatever before this. But it was really this paradigm shift into a like, not even high, but like a medium rate market that like kind of opened up this entire like sector of this industry in tokenization. So I guess can you talk a little bit through why? You see like that change in the interest rate environment as such an important shift in like the mentality of people and like why that one thing was needed to get people to take seriously the idea that we can represent ownership of assets that exist in the physical world on chain. **Speaker A:** So really the question here is like, why own an asset on chain? Why would I own my house on chain other than to say, oh, I own my house on chain, it's cool, you should buy it. I don't really see any major advantage. And so that's why I think tokenized real estate never really took off. Tokenized stocks never really took off. So it took a combination of, like you said, medium rates, but also the Bear Market of 2022 for T Bills on chain to become attractive. People made their gains in the 2020-2021 cycle and then they kept it in stable coins. I would guess that a large part of this stable coin supply simply cannot be redeemed. For example, it's being held by Chinese nationals, right? And then they can't get a circle account, they can't get the tether accounts. They're just holding stablecoins because they don't want to hold anything else and they want to be risk off. So there's this percentage of the stablecoin supply that is just sitting there being held as a FX hedge, right? And it's not earning yield and all along or all of a sudden rates are now 5%. Well naturally it makes sense for this stablecoin supply that's getting 0% to suddenly get 5%. And so it's an obvious product market fit. And that's why it really just took off the way it did. I think, you know, if there was no bear market, right, if we had just been in a super cycle all along and you know, bitcoin's at like a million dollars or whatever, then, you know, this 5% T bills, maybe it would be attractive, maybe there would be, you know, some product market fit, but I doubt they would have taken off as much as they did. **Speaker B:** Interesting. So like, I know we can't really have a bear market without the higher interest rate environment and like, you know, their, their vote, they're intricately tied together. But in a world in which, let's say like rates went up as high as they did or maybe even higher, but in the word super cycle gives me heartburns. But we were in a true super cycle. Like, do you, you really think that we possibly like wouldn't have really seen any and like very much if any Energy into tokenizing T bills or do you think that tokenization was always going to happen? It's just like maybe it wouldn't have been T bills, maybe it would have been equities first. **Speaker A:** Yeah, I do think tokenization is always going to happen. Right. But I doubt they would have happened so suddenly if there was no bear market, if there was no attractive product to actually go through the hassle of buying then, then I doubt they would have taken off, you know, like tokenized stocks. Right. That was one of the first things that I was interested in. Just because it's cool. Right. You know, why not hold, hold like, you know, Tesla in your Metamask wallet? I think the challenge there is on chain liquidity isn't great. And if you want a kyc, it's a lot of paperwork. And I already have a Vanguard account, I already have a Fidelity account. Why do I have to do all this stuff on chain just to get access to the same product? Fees are probably not as good and the challenges are just too great, I think for, you know, for tokenized equities right now, you know, or you know, last year. Going forward, I am cautiously optimistic that this will improve. I think fees have to get more competitive and I think in terms of UX onboarding, you know, KYC that should be also improve. I'm hoping for more innovation in the space. I'm hoping for something like shared KYC so that you KYC one time on chain and then that's it. That could be through, for example, Coinbase's attestation service or something else. But I am optimistic. I just don't know how long it's going to take for us to get there. **Speaker B:** No, I hear you. And let's put aside the regulatory aspect for a moment. We'll get right back to it. But let's put aside the regulatory aspect for a moment. How much of. I think you made a very good point, especially about the real estate where it's like, what's the point of owning a security on chain other than like it's cool? And I think that you exactly pointed out what the point of holding like tokenized treasuries on chain is, is that there's a huge amount of stable capital parked that needs access to yield but like is not allowed to access it. Right. And so there's like this arbitrage that is offered by this technology that essentially says people that traditionally aren't allowed to hold these assets like can hold them through crypto. And I guess in my head like that's Exactly. Going to be the same dynamic that brings equities on chain. It's the same. People want to own equities and want to own more attractive investments and if there's a demand, supply will eventually find it. Right. Regardless of what Gary Gensler wants to say. And so we'll get into how it actually works in the regulatory thing in a moment. But I guess my question to you is, do you think that that's like a healthy dynamic that essentially we're able to build these products because it's a way to get them to people that otherwise are not allowed, like explicitly not allowed to hold them? **Speaker A:** Is it a healthy dynamic? Yeah, I, I don't know if it's healthy. But if you think about how for example, tether got adoption, it was through these people that otherwise couldn't access the dollar. Right. How did Bitcoin even get adopted in the first place? It was, it was because of FX controls. Right. People want an alternative to, to like, you know, their government backed, you know, dollar or whatever and they want to be able to send it to their family, you know, remittances. All of these crypto, you know, ideas were sort of born out of or not born out of, but like they found product market fit out of, out of pure need for an alternative, you know. And if the future is these Chinese nationals wanting to buy Nvidia but they can't through their brokerage or whatever, then of course if going on chain is the only way for them to do that, then that will have to exist. Right? Yeah. Capital finds a way. **Speaker B:** Yeah. I guess your point is healthy or not, the point of crypto is that if it's possible, someone's going to build it. And I guess like maybe the real lesson here is to turn back around at the U.S. government. And so if you don't build like well understood like easy to use guidelines, like we're going to get more tethers and we're going to get like tethers that instead of just giving stable assets, are giving volatile assets and like then what kind of world are we in? **Speaker A:** Yeah, yeah, exactly. **Speaker B:** Cool. So let's talk a little bit about like the regulatory problems and like the things that you've had to go through in order to like make your first product like even viable. So can you talk a little bit through first, like what are the regulations that are salient to you around treasury bills and then to like how do you, as you know, a co founder and like a leader in this company, how does the company navigate through the process in order to get to a point where, like, you feel comfortable actually selling something to the public. **Speaker A:** So the way we are structured is a fund. We are a licensed Cayman Islands fund, which is a popular jurisdiction for funds of all different types. And there's plenty of service providers in the Cayman Islands. And everyone sort of knows how the Cayman Islands operate. That's why we chose them. The way to provide exposure to T bills is basically you have to create a wrapper around it. You can't offer them directly because it's just really hard to do so because they have to be held by a rapper, sort of, if that makes sense. It's just that there's differences on the type of wrapper that you choose. So we chose the Cayman Islands, right. Other people do. The British Virgin Islands people do the Bahamas or Seychelles or Switzerland or Germany. And these are all fine. There's, you know, slight differences in each, you know, in terms of what the minimum subscription size is, the number of investors that can have the accreditations of each investor, so on and so forth, marketing guidelines. And yeah, we. We sort of looked at what was available in the market and sort of just went with something similar. There's no. We couldn't find really a way to. To get around like this. This wrapper. And yeah, so we simply spoke to a bunch of lawyers. And talking to lawyers was probably like the bulk of the work here. Just figuring out what the right structure is. And like, how many different, you know, pieces of this wrapper do you actually need? So in our case, we have a. We have a entity in the British Virgin Islands and also an entity in the Cayman Islands for various reasons that I don't fully understand because I'm an engineer, right. I like things that make sense. This legal stuff doesn't really make sense, but anyways, yeah, that's where we are. We talked to a bunch of lawyers and we decided, oh, this is the best approach. You know, this is how much it costs. And that was so sort of that, you know, we would just chose the thing that made the most sense for us. **Speaker B:** And so let's. Let's talk through how it works. So if, like, can you go through the flow of funds to. Let's say, like, I am somebody on chain with like a certain, like, say $100,000 worth of USDC. And I want to, like, get exposure to T bills through using cogito. Like, how, what. How does this work? Do I send money to a smart contract? Is that smart contract allow you to withdraw the USDC into cash where you can Go buy the bills, like just talk us through what's actually going on here. **Speaker A:** Yeah, exactly. So first you would have to KYC and we have a, we use SumSub for our KYC which you know, a lot of other exchanges and tokenized funds will use. And once you finish that process then your address is whitelisted so that gets sent on chain and then from that address you are able to deposit USDC into our smart contract. And this smart contract holds a little bit of USDC for instant redemption, but it also manages the net asset value of the fund. So we have a fund administrator who is going to take the USDC out of the smart contract, redeem it for fiat, send the fiat to our brokerage account and then we are going to buy three to six month T bills. Right? Then the value of the brokerage account will be calculated by the fund administrator and then they're going to take this number and then just put it on chain. And so we put it on chain using chainlink. Then this number gets calculated in Smart contract and your number of shares are issued and then these shares are just ERC20 compatible tokens. The one caveat is we have a whitelist restriction so you can't freely transfer them to anyone. You can only transfer them to other whitelisted addresses. And this restriction is because of the Caymans I believe. But yeah, so this does allow some secondary liquidity. For example, if you wanted to do an OTC trade with somebody else that is already whitelisted, you could totally do that. Redemptions work pretty similarly. You just call a function or click the button in the UI and then the whole process works in reverse. And after up to two days you would get your USDC back if you're redeeming just a little bit. For example, if you're redeeming 100 bucks and there's more than 100 USDC in the smart contract, you just get it instantly, no problem. **Speaker B:** I think what's really interesting, and this is always the problem with treasury backed like products is this whitelist restriction you have on the token. Like you can only transfer it to essentially other KYC participants. And so do you envision creating a ecosystem of like dapps that allow like people whitelisted to like obviously not get the full benefit of AAVE or of Uniswap, but like at least get some sort of interactability amongst other whitelist people? Are you considering deploying a specialized curve or a specialized lending market that allows people to at least in some ways interact with DEFI using their shares in this Fund. **Speaker A:** Yeah, so that is a great question. Of course, the whole reason we're building this on chain is to allow composability. Right. And the other benefits of building things on chain offers. So we have thought about building our own lending protocol and for example, that would allow you to deposit your T bill tokens and borrow USDC against that. Right. And so the lenders could lend USDC permissionlessly and be able to collect some yield that's slightly less than the risk free rate. There are other platforms that have already built this. So another area that we're exploring is just partnering with these lending protocols and just allowing them to use our T bill tokens as collateral. Right. And once we have other assets tokenized, for example, if we have an equity fund, we could allow the equity fund tokens to be borrowed against as well. **Speaker B:** So while we're still spinning on the realities created by regulation of needing kind of a, not even a permission, but a KYC space, do you see this being solved with somebody at like a centralized credentialed person like Coinbase providing attestations and maybe some zero knowledge in there and then just like you have kind of this universe of wallets that's allowed to interact in this universe of wallets that's excluded. Or do you see this activity kind of migrating onto a chain in which like to enter and exit the chain you need to deal with some kyc, but within it like everyone is fair game, I guess. Like where, where do you see this industry going in order to deal with the actual KYC problem? **Speaker A:** Yeah, that's a good question. I actually have not thought about that. I. I've always thought that there would be two parallel worlds, right? One that is kyc, you know, one that is walled and one that is complete anarchy. And so yeah, I'm not sure what that walled garden will look like if it's going to be on base using Coinbase's attestation service or something else. But I do know that in the long term there is going to be some separation and then the bridges in between these two worlds will be challenging to build and operate in, but they need to exist for liquidity reasons. I just, I fully believe that in the idea of just this global liquidity just being completely liquid and able to move around anywhere. **Speaker B:** Jumping back to our conversation about corporate chains, I just. So today we have, J.P. morgan has. It's not Quorum anymore, it's Onyx, right? And what they do, like today they're literally doing hundreds of billions of dollars of repo transactions between like 26 banks. And I don't know, feel free to disagree with me on this but like I'm just so, so convinced that eventually that is going to end up as a permissioned but as an L2 on Ethereum. Because if, if that's not the end state, there's no reason to have like a consensus engine like coordinating between these 27 banks. Right? Like the 27 banks, they're all like real entities with real jurisdictions. They all know each other, they can all sue each other. Like what's the point of any of this proof of stake between them. And so I just, I'm so convinced that eventually how like tradfi institutional banking is going to interact with blockchain is just through like the, either the L2 paradigm or some sidechain paradigm or something like that. And I guess this third space is what you guys are building which is deployed directly in the wild jungle, but in this kind of protected sanctuary space. And so this is the scary part but the fun part about being on the bleeding edge is you never quite know where or how to build. But to me there's just this looming question and all this BTC ETF stuff makes it just so much more relevant. But like how does KYC and how does like companies that need to worry about regulation deal with our crazy ass Twitter PFP industry is like one of the like billion dollar questions open right in front of us. **Speaker A:** I'm hoping for a world where we have for example like KYC hooks on Uniswap before that would be kind of cool. I'm not sure how far we are away from that happening, but if we had that for example, then you could just use whatever roll up you want to or even mainnet and just like if you need KYC, use the hook. If not, don't. It's all good. **Speaker B:** Yeah. And again now we're a little bit spinning here, but when my friends outside of this industry asked me what is actually the use case of crypto and and like the one that is just like actually the thing that's going to send us to the stratosphere and like really make crypto obvious is I just think crypto and like crypto identity is going to replace passwords. Like clear and simple. Like passwords are broken. Look at the Gary Gensler SEC tweet situation from just yesterday. And so I think like part of that is going to be like as soon as we have identity on chain, like you know, we're. And ZK makes this all so much clearer. Like I'll be Able to register with my government that I'm a U.S. citizen and then can provide attestations to that and then I'll be able to register with my bank if one day eventually I have enough money to be accredited investor like I'll be able to register with them and provide that zero knowledge proof. And so I just like the, the questions are clear in front of us and but the answers are just like so obvious based on the technology that again it's just like a really exciting time to be here. **Speaker A:** No? Yeah, totally. **Speaker B:** So okay, so we spent a lot of time talking about treasury bills and I see if you go on your website right now the your next product is already right in front of us. It's I think you call it the green investment fund. So can you talk a little bit about what that is, why you chose that as kind of the next product and why you think like of all the things you could offer that's going to, you know, achieve the demand that you want. But yeah, I guess. Can you answer that with just also helping us understand how do you guys identify what the right opportunities to tokenize something and bring it on chain are versus what's just kind of noise that's out there that is probably not worth your very precious engineering time. **Speaker A:** So the idea behind green funds is actually sort of back to the stablecoin idea. We wanted to have a stablecoin that was pegged some green index, right. And it could be independent from the US dollar and it would be based on sort of environmental indicators. The realistic version of that is we buy a Green Bond ETF, right. BlackRock has one of those products. It's 300 million a. We just buy that and we tokenize it. The reason we would buy this over T bills is once rates go down and we are expecting cuts this year, then corporate bonds will have more of an appeal. And green bonds in corporate bonds. Sorry, green bonds are a type of corporate bond. So the yields are very similar. Right. It's just sort of a branding marketing thing. So the idea is, you know, so we're launching with T bills first because it's the most obvious opportunity right now. In a year or two, corporate bonds will be the most obvious opportunity. And you know, if you want to go risk off on chain using your stable coins, you just buy corporate bonds. Right. It's pretty simple to understand. Now after that is where things get a bit tricky. I mentioned before, you know, tokenizing equities is challenging but it's cool again. I still think it's challenging but cool I think our spin on tokenized equities is we just run machine learning on off chain basically and then we just weigh the portfolio dynamically based on all of these different indicators. And there's that AI element which is kind of cool. Not many people, I don't think, especially in retail, doesn't really have access to the type of investment. And so the angle here is that we would just do this AI driven fund that is on chain. Because it can be on chain, why not? **Speaker B:** So before we get to the AI driven fund and the next investment or sorry the next opportunities after the green fund, can you talk a little bit about. So the big difference between Treasuries and Green fund is one is issued by a government, like the government and the other is issued by companies. So can you talk a little bit about any of the differences in like either the regulatory side or just like how you had to build the product that comes from like this like distinction just between like sovereign issued debt versus. **Speaker A:** Corporate issue debt in our case, because we are structured as a fund, it doesn't make any difference at all. Actually any asset that is publicly traded, whether it's US UST bills or UK guilts or you know, corporate bonds from Boeing, they're basically all the same to us. We just buy them on the exchange and then we put it in the fund. We tokenize that and we're done. Yeah. So you know, because we're not issuing bonds directly, we're not like a primary market, There is no difference. There are a few other projects that are trying to do that which is slightly different from us and we are not that. **Speaker B:** And then. Sorry, I guess I should have asked this earlier but when we're like talking about the actual stuff that's going on in chain, on chain, like so let's say I invest with 100 USDC. Am I earning returns in USDC? Am I earning them in a stablecoin that you're issuing? Like how does the actual flows of this work from the investor side? **Speaker A:** Yeah, you would be earning interest in USCC basically. Yeah, yeah, just you would buy the fund at some nav. Let's, let's say you enter at 105 and then you exit a few months later. And then now the nav is 107. Right. So you would just make $2 right off of your. **Speaker B:** And then you're facilitating that with like the, the linchpin piece being your ability to like redeem and create USDC at a one to one ratio through Circle or Coinbase or however you're doing it. **Speaker A:** Yep, yep, exactly. **Speaker B:** Got it. And that's why, like that distinction that you made that you're not actually issuing any bonds or anything, I don't mean to take away anything from what you're doing, but at least on this aspect, like really all you're doing is acting as like the guy running back and forth between the like fund bank account and then the fund ledger and just like matching them up, right? **Speaker A:** Yeah, yeah, exactly. I mean it sounds simple, but you would be surprised at how much paperwork and like box checking there is in that, you know, two sentence process. **Speaker B:** No, for sure. And on top of that, like you, you just really, really want to make sure that like nobody can make a stupid error otherwise, like you're just losing people's money. So no, I don't mean to take away anything at all, but just trying to like wrap my head conceptually around what you're doing. So I think now is like a great opportunity to move into like the AI stuff and like the more open field, like ideas that you guys are having. So you talked a little bit about how like you want to deploy AI to like make just more sophisticated, more nuanced, like stock picks, I guess, and to create like tighter funds that better reflect like what an investor wants. So can you talk a little bit about like what are the types of AI tools that you're using to just like create better funds but then also like, what do you think the opportunities outside of just like better or faster stock picking do you think there are to deploy AI into investment planning? **Speaker A:** Yeah. So first I'll say I'm not the AI expert on our team. We have a quant who knows more about this stuff than I do. I'm a web developer, right. I Write solidity in JavaScript. But the basic idea is we collect a bunch of data, like perhaps thousands of different indicators, and then we have these models and then we train the models on the data and it spits out decisions to buy or sell or to hold and we simply follow the instructions. And this is not a new idea. I think people have been doing this since the dawn of computing, probably for a very long time, but perhaps now there's we can do some large language model type of stuff. We can say, oh, given all of these data points, given all of the sentiments, given all of these tweets tell us, is retail gonna pump Tesla today or not? Yes or no? Right. So it's slightly evolved. It's the 2023, 2024 version of what we did 50 years ago. So yeah, as for potential of AI in investing, yeah, I think it's a huge field. Again, I'm not an expert, so I don't know what state of the art is, but basically there's more and more data being produced every day and humans can't analyze it, but the computers can. So we just pump all the data into this big model and then run it somewhere and it just tells us what to do and then we just listen and that's that. **Speaker B:** Got it. So it sounds like the big unlock that like Cogito is bringing to the table is less about like the, the specific application of AI and more in the realization that like AI and the combination like the system that you built that allows you to bring like not real world but let's say traditional assets on chain is like a super, super powerful opportunity to like not only just bring the stuff on chain, but bring like the cream of the crop and like not just to allow degens to make investments but like to empower them to make like better investments than if they were trying to do the exact same thing on just like a fidelity account. **Speaker A:** Yeah, yeah, pretty much. You know, your average retail user is not going to have access to like a powerful AI model that you know, is trained on all of these data points that, that tells them what to buy. It's a lot easier for them to say, oh look, there's an on chain fund that uses AI to, to, you know, to make, to optimize its returns. That sounds cool. I'm going to invest. You know, it's a, it's an easier. **Speaker B:** Concept to digest and I guess like as you're, you know, we're still very early days, I'm sure you're still building like some just basic nuts and bolts stuff, but once you kind of flip into the mode of operation where you're really like searching for users and for capital, like how much do you foresee your potential users to be like at least your first potential users to be degens on chain with idle capital that are looking for this profile of returns versus people in the traditional investment world that are interested in these kinds of returns but like might be interested in getting what they have through a traditional broker, like you know, experience and exposure. **Speaker A:** On chain, there's basically two groups of people. One is the on chain daos. Slash on chain startups. You know, they've raised some money and they're looking for safe return right now. Sure, they could go deposit into aave a compound or they could buy T bills. Both are equally valid choices. I think we're just giving them an alternative. The other group of people are the ones that are not crypto native. Let's say they're living in Southeast Asia, in Thailand or whatever. And maybe it's difficult for them to buy T bills. Right. They have to go and open up an international brokerage account and then, you know, their bankers are asking all these questions, yada yada yada. It's much easier for them to simply buy crypto. Right? Like buy tether and then deposit into our fund and get access that way. So we're targeting both groups of people. **Speaker B:** Yeah, I mean, it does seem like there's a huge opportunity for the non crypto natives, but God, it's already so hard to get people just interested in crypto willing to touch the chain and then let alone to. Then you have to convince them like, okay, put your most stable capital into this most volatile place. And so I hear you, but that sounds like a tough hill to climb. The Dow treasury one is super interesting because obviously so much idle capital is just sitting in some really weird places. My question for you is, have you thought through how to allow these really crypto native entities specifically that don't have Social Security numbers or tax IDs and can't KYC in the traditional way? Like how do you get them to a place where they can participate in your system? **Speaker A:** Yeah, I think daos need at least one person to handle all of the paperwork. Right. Because otherwise it's really hard for them to do even basic things like payroll or spend money on marketing. So I think in a lot of cases there is at least one person willing to kyc and for us, that's it. That's enough. **Speaker B:** Got it. So what, it's less important that like, let's say like the entity, it's fake Dao, right? Let's say fake Dao has like $10 million in USDC and I am, you know, officer of fake Dao or I'm very influential in fake Dao and I'm like Norton, I'm willing to like tell you who I am and give you my Social Security number and kyc. But like I'm telling you upfront that the money that I put in is not my money and like I am not responsible for it and I don't even really know where it came from. Is that like going to be okay with you guys? Or like, is that something that you kind of need to work through with each individual case to like really shepherd it to something that's acceptable for both of you? **Speaker A:** Yeah, yeah, that's something that they're going to have to discuss with our fund admin because they're the ones that have to sign off on it. You know, they have their own guidelines. Guidelines because they're being regulated. And so yeah, you're right. It's going to be a case by case basis. **Speaker B:** Got it. Yeah. But bottom line is, yeah, I do think that like it makes so much sense to build products for idle capital and like, yeah, we can talk about all the Chinese nationals and like the Russians who money's been locked away and the North Koreans who've stolen it and like, yeah, of course they want yield and that is what it is. But what is objectively just a legitimate thing are these Dow treasuries that are creating real products and have amassed real amounts of money. And I don't really know how the regulatory answer is going to come, but eventually they'll be able to deploy their assets and it makes a lot of sense to be a place ready for that. **Speaker A:** Yeah, totally. **Speaker B:** Cool. So the last five minutes here, I would love to just hear about what you guys are excited about in 2024 and beyond. And hopefully we have a bull market that is building and maybe we'll see by the end of the year or early next year. Let's all hope for that. But outside of just the liquidity and the money and the TVL and all that stuff in terms of building, what are you guys really excited about building and putting out there? And how are you going to make Defi just a better place to deploy capital? **Speaker A:** Yeah, I personally am excited about building on new chains. People talk about say like Monad, swe, all these exotic new Altel ones and I think it'd be cool to just launch on everything new and just be the place to go on each of these chains for just safe yield. I imagine there's not going to be too many new products, new safe products, especially on these new chains when they first launch. And so yeah, we are looking forward to just being first movers on some of these new chains and just having a safe place to deposit money. Once you bridge your USDC over there, you got nothing to do. I just chill in some T bills I guess. Why not? **Speaker B:** So when you're looking at these new chains and we don't need to talk about like how each individual one has its own individual risk profile and blah blah, blah, but when you think about just moving liquidity across chains and like, you know, at the very least like, let's say someone deposits USDC in SEI and like Maybe it's hard. At some point you're going to need to worry about like liquidity across chains just within your own products. And my question for you is, is that something that keeps you up at night or have we reached a stage in this industry where through Chainlink and Layer Zero and all of these bridging solutions that we actually have enough rock solid infrastructure pieces that that's just something that you know will be kind of plug and play? **Speaker A:** Yeah, I think from a UX perspective having all of these different chains and layers, layer threes, fours, zeros, whatever, and these different wrapped versions of like seven different wrapped versions of USDC in the Cosmos ecosystem, that's very confusing from a UX perspective. You know I, I personally have like 10 wallets extensions on my browser and like I forget which one goes for which chain. It's all very confusing. There needs to be improvement on this. Definitely. It's just we, we are not the ones to do this for us because dollars that you deposit with us are sort of moved off chain. Right. We can just redeploy that on chain anywhere that we want. Wherever Circle is available, we can just issue you new USDC on that chain. So for us it doesn't really matter. But I do agree with you from a user perspective it's very confusing. **Speaker B:** So I guess really your choice of USDC as your base on chain asset kind of solves this problem for you because Circle has like cre has recognized this before we did and then created the infrastructure to basically like take on all of the like minting and burning risk. I guess my final question for you is, does that kind of lock you in, at least for the foreseeable future into USDC as a asset or do you think about like how do we bring in other things like tether or even like non redeemable stable coins, like let's say a frax or a daisy. How do you think about the world of stablecoins in regards to the product that you are building? **Speaker A:** Yeah, of course we would love to accept every type of stablecoin and for that we actually partner with market makers and users are able to deposit whatever they want with us. Of course that'll have to get routed through the market maker and there could be fees incurred along the way. So I would like to say that we are chain agnostic and stablecoin agnostic just because we work with market makers, sort of, you know, we, we are, our core mission is to do all the legal stuff, to do the fund structure, to do the paperwork and then Everything else, we partner with as many different service providers as possible to make it easy for investors. **Speaker B:** Yeah, awesome. Well that is like an incredible note to walk out on because I think that as we like walk further and further into the future and we really wrap our hands heads around the modular blockchain thesis, I think it's going to become more and more obvious that in order to build companies in this industry, we have to build modular companies. And like what you're building is something that is like has expertise in like this one specific core part. And then you, you, you need to find other players that are not in your core competent 10C and plug them together in order to create like a user facing product. And so again I think like what you guys are doing is like very cool. But more than that like you're building it in the right way for like the industry that we're in. So Norton, man, I really appreciate the time. I really appreciate like you just sharing so much information on like really how real world assets are being built and how things are changing. And I guess before I let you go, can you please just share with the audience like where they can find you, where they can find Cogito and if they just want to learn more, where should they be looking? **Speaker A:** You can find me on my Twitter at Float. Floatboat. You can also follow Cogito on Twitter Cogito Protocol or check out our website. And that's it. Thank you for having me, Rex. **Speaker B:** No man, it was my pleasure. And I can't wait to talk to you when it's not just like bond funds that you have on chain, but like the entire spectrum of assets. So Norton, good luck, happy New Year and talk to you soon. **Speaker A:** All right, see you, Rex. Bye.